The Union Parliament has the power to legislate for the whole or any part of the territory of India, which includes not only the States but also the Union Territories or any other area for the time being, included in the territory of India. The Seventh Schedule of the Constitution embodies three lists namely, the Union List, State List and Concurrent List consisting of 97, 66 and 47 items respectively. The Parliament enjoys the exclusive power to legislate on subjects enumerated in the Union List. The State Legislature has exclusive right to legislate on the State List. Both Parliament and State Legislatures have power to legislate on subjects contained in the Concurrent. List. But in case of conflict between the law of the State and the Union on a subject in the Concurrent List, the law of Parliament prevails.
The Union List, State List and Concurrent List consisting at present 100, 61 and52 items respectively. The 42nd Amendment Act of 1976 transferred five subjects to Concurrent List from State List, that is, education, forests, weights and measures, protection of wild animals and birds, and administration of justice; constitution and organisation of all courts excepts the Supreme Court and the high courts.
The Administrative power of a State extends only to its own territory and with respect to which it has legislative competence, whereas the Union has exclusive executive power over: (a) the matters with respect to which Parliament has exclusive power to make laws and (b) the exercise of its powers conferred by any treaty or agreement.
Article 268-293 in Part XII deal with the Financial relations between centre and the states. The Centre and States are empowered by the Constitution to impose various kinds of taxes. And certain taxes are imposed and collected by the centre and divided between centre and states based on the recommendation of the Finance Commission appointed by the President under Article 280 of the Constitution.
Late Prime Minister Indira Gandhi appointed the Sarkaria Commission in 1983 to make an enquiry into the Centre- State relations. The Central government has implemented 180 (out of 247) recommendations of the Commission. The most important is the establishment of the Inter-State Council in 1990.
In 1969,the Tamil NaduGovernment appointed a three member committee under the chairmanship of Dr. P V Rajamannar to examine the entire question of Centre-state relations.